Sales Tax and Use Tax Administration


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Sales Tax and Use Tax Administration

  1. 1. Sales and Use Tax Basic Information to Protect Your Company Presented by Michael A. Kochis Presented November 9, 2006
  2. 2. Disclaimer This program presents introductory information about general sales and use tax requirements. It is not a substitute for competent tax and/or legal advice when dealing with the complexities of complying with the various state sales and use tax statues for your individual business.
  3. 3. Definitions <ul><li>Sales tax – is imposed on tangible personal property by retailers. </li></ul><ul><li>Use tax – is the complement to sales tax and is imposed on consumers of tangible personal property. </li></ul><ul><li>Tangible personal property – personal property which can be weighed, measured, felt, or seen. </li></ul><ul><li>Seller’s Permit – a license to collect and remit sales tax to the taxing jurisdiction. </li></ul>
  4. 4. Definitions <ul><li>Tax Return – the monthly, quarterly, or annual report of sales and tax to the taxing jurisdiction. </li></ul><ul><li>Resale sales – sales where the purchaser intends to resell the item in their normal course of business. </li></ul><ul><li>Exempt sales – sales of items that are not taxed by a particular taxing jurisdiction. </li></ul><ul><li>Resale/tax exempt certificate – a form provided to the seller from the purchaser which excludes the purchase from being taxed. </li></ul><ul><li>Tax Rates – the percent or amount of tax charged on a taxable transaction. </li></ul><ul><li>Filing timeline – the due date of the return to prevent interest and penalties for late filing or non-filing. </li></ul>
  5. 5. Requirements of a Business <ul><li>Obtaining a seller’s permit. </li></ul><ul><li>Engaged in business. </li></ul><ul><li>Tangible personal property. </li></ul><ul><li>How to apply for a permit. </li></ul>
  6. 6. Applying Sales Tax <ul><li>What is taxable? </li></ul><ul><li>Who must pay sales tax to the taxing jurisdiction? </li></ul><ul><li>Who pays the sales tax on a sale? </li></ul><ul><li>What rate is charged? </li></ul><ul><li>Are there special sales taxes charged? </li></ul><ul><li>What happens if I collect too much tax? </li></ul><ul><li>Do I charge an out-of-state company sales tax? </li></ul>
  7. 7. Applying Sales Tax <ul><li>Can I make the customer pay sales tax after the fact? </li></ul><ul><li>What records do I need? </li></ul><ul><li>How are exports handled? </li></ul><ul><li>What if we drop ship our product? </li></ul>
  8. 8. Use tax requirements <ul><li>What is use tax? </li></ul><ul><li>What is subject to use tax? </li></ul><ul><li>What rate of tax do I pay? </li></ul><ul><li>Why do I have to report use tax? </li></ul><ul><li>Can out-of-state companies charge me sales tax? </li></ul>
  9. 9. Using Resale Certificates <ul><li>What are resale certificates? </li></ul><ul><li>Why are the required? </li></ul><ul><li>What information is required? </li></ul><ul><li>What are my responsibilities as a buyer using a resale certificate? </li></ul><ul><li>Must I submit a resale certificate on each purchase? </li></ul><ul><li>What are my responsibilities as a seller accepting a resale certificate? </li></ul><ul><li>Can I find current seller’s permits? </li></ul>
  10. 10. Reporting Taxes <ul><li>Tax Return </li></ul><ul><li>When is the return due? </li></ul><ul><li>What happens if I file late? </li></ul><ul><li>What do I do if I do not owe any taxes? </li></ul><ul><li>What happens if I don’t file or file late? </li></ul><ul><li>What are prepayment accounts? </li></ul>
  11. 11. Credits for Sales Tax <ul><li>How do I issue a credit for sales tax? </li></ul><ul><li>How do I write off uncollectible taxes? </li></ul><ul><li>What if a customer disputes the taxes? </li></ul><ul><li>Who is responsible for the taxes? </li></ul>
  12. 12. The Audit <ul><li>Why am I being audited? </li></ul><ul><li>What are they looking for? </li></ul><ul><li>How many years do they audit for? </li></ul><ul><li>What records will the auditor review? </li></ul><ul><li>What about contract auditors? </li></ul>